USD/JPY Technical Analysis: Expectations for the top of 140.00

Sudden change in market sentiment from bearish to bullish.

Last week’s trading was supportive of bullish strength and direction control in the USD/JPY currency pair as the currency pair moved down that path towards the 137 resistance level, 24, the highest for the currency pair in nearly a month. This performance restored the bullish expectations for the currency pair to approach the psychological resistance level of 140.00 again. Amid last month’s trading, the dollar-yen pair surged towards the resistance level of 139.38, the highest for the currency pair in 25 years. I have often recommended buying the dollar-yen on every falling level until the currency pair falls towards the support level of 130.40 at the start of this month’s trading.

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The yen is a popular asset in turbulent times.

The results of recent U.S. economic data have removed many doubts about the future of the stagnating U.S. economy in light of the Federal Reserve’s continued hike in interest rates, which has brought back the strong impetus to think to buy the US dollar again.

USD/JPY Fundamental Analysis

The USD/JPY currency pair is trading higher after investors interpreted the minutes of last Thursday’s FOMC meeting as an indication that the Federal Reserve is not yet done with raising interest rates. American interests. The announcement came on the back of promising claims data, with initial U.S. jobless claims last week at 250,000, well below expectations of 265,000.

Continuing claims from the previous week also topped 1.438 million with 1.437 million recorded. Prior to that, US retail sales figures were also better than expected, although general retail sales did not miss estimates.

In Japan, the national CPI for July exceeded the expected (annualized) change of 2.2% with a change of 2.6%. On the other hand, the CPI for food and energy products exceeded expectations by 0.6% (1.2% year-on-year), while the CPI for non-fresh food was in line with expectations by 2.4%. Prior to that, Japan’s exports and imports also beat expectations by 18.2% and 45.7% respectively, with 19% and 47.2% (y/y), while the merchandise trade balance for this month exceeded expectations.

Commenting on the performance of the US dollar. “The big picture for the dollar is that it’s in a strong uptrend,” said Matt Simpson, senior analyst at City Index Brokerage in Brisbane, adding that it ended a weeks-long decline. . “In a way, the bulls are looking to pull back and I think the Fed minutes gave them a reason to do so,” he added.

Minutes from the last U.S. Federal Reserve meeting showed bank officials had seen “little evidence” late last month that inflationary pressures in the United States were easing. The minutes noted a possible slowing in the pace of increases, but not the shift to reductions in 2023 that traders were pricing in interest rate futures until recently.

For his part, Philip Marie, strategic analyst at Rabobank, said in a note to clients: “Once they get to a sufficiently restrictive level, they will stick to it for a while.” And “obviously this contrasts with the early Fed pivot that markets were pricing in.” Investors expect there to be a 39% chance of a consecutive 75 basis point US interest rate hike in September, and they expect rates to peak at around 3, 7% by March and stay there until later in 2023.

USD/JPY technical analysis

In the short term and based on the performance on the hourly chart, it looks like USD/JPY is trading within an ascending channel formation. This indicates significant short-term bullish momentum in market sentiment. Therefore, the bulls will look to ride the current wave of gains towards 136.84 or higher at 137.45. On the other hand, the bears will be looking to take profits around 135.69 or lower at 134.99.

Looking at the long term and based on the performance on the daily chart, it looks like the USD/JPY pair has recently completed an upside breakout of the descending channel formation. This indicates a sudden shift in market sentiment from bearish to bullish. Therefore, the bull will look to extend the current rally towards 139.47 or higher up to the resistance at 142.50. On the other hand, bears will aim for long-term profits around 133.26 or lower at 130.23 support.

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